David Jones backs Woolworths offer

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Sydney - Shareholders of David Jones had approved a $2 billion (R21bn) takeover from South Africa’s Woolworths, voting overwhelmingly to create a southern hemisphere department store giant, the Australian retailer said yesterday.

Investors set aside their nostalgia about the iconic 176-year-old firm falling into foreign hands and embraced the chance to thrust David Jones into the internet age, with Woolworths’s offering of A$4 (R40) a share receiving 96.8 percent approval.

The takeover gives David Jones the financial firepower to ramp up its web offerings and in-store label, while helping Woolworths become a major global player with a combined $5.6bn in annual sales.

“We believe David Jones as an Australian icon will be better able to compete,” David Jones chairman Gordon Cairns told 500 shareholders who voted on the scheme in Sydney.

Major shareholder Solomon Lew, a Melbourne-based billionaire who threw Woolworths’s bid into turmoil by amassing a potentially blocking stake weeks ahead of the vote, abstained from voting, meaning his votes were automatically redirected in favour of the deal.

That cheered smaller shareholders, who have watched the retailer fail to grow profit for the past four years in the face of brash new competitors abroad and online. The Woolworths offer was higher than the stock has traded in three years.

But local analysts have said the $2bn offer, at a 25 percent premium to David Jones’s share price before the deal was announced, was too much to pay for an asset that would not yield the high sales growth possible in Africa, where retail sales are growing 30 percent a year.

Woolworths chief executive Ian Moir said he was still committed to expanding in sub-Saharan Africa, where the retailer already had a presence.

David Jones rose 1.3 percent to A$3.98 in Sydney yesterday. Woolworths closed 2.8 percent up at R82 after setting an intraday record of R82.95.

David Jones and larger local rival Myer have struggled for half a decade as online retail and so-called “fast fashion” chains like Zara and Hennes & Mauritz have ravaged their traditional store-based model.

Shareholders at the meeting expressed concerns ranging from foreign ownership to the possibility that David Jones’s in-store pianists could lose their jobs. But even those with family ties to the firm’s rich history were ready for change.

“It’s what happens,” said Professor Geoffrey Sherington whose great-grandfather invested in David Jones in 1890 and became a director in 1908. “It’s sad, but [firms] pass on.”

Lew has prevented Woolworths from taking full ownership of Australian retailer Country Road for 17 years by keeping his 11.88 percent stake. His rapidly acquired David Jones stake was interpreted as a ploy to pressure Woolworths into offering to buy his Country Road shares at an inflated price in exchange for his approval of the David Jones deal.

If that was his intention, his gambit paid off on June 24 when the South African firm offered A$17 for each of his Country Road shares. Lew paid A$2 a share for them in 1997.

That deal raised concerns at the Australian Securites and Investments Commission (ASIC) about whether Woolworths had offered Lew an inappropriate inducement to accept its David Jones bid.

So far no wrongdoing has been found, but the ASIC may again raise objections when a final nod for the takeover goes before courts on Thursday.

In any event, Lew’s lawyer, Jeremy Leibler attended the vote on his client’s behalf and abstained from voting, as some shareholders and watchdog ASIC had requested.

“The Country Road discussions are… a sideshow,” David Jones’s Cairns said when asked if the Woolworths offer was preferential treatment for Lew.

Leibler and Lew declined to comment. – Reuters


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